Bucking the trend: how UK family businesses are winning in the drinks industry
Last week was award season for family businesses in the UK and of the four main winners, it was interesting to note that three came from the alcoholic beverage sector, writes Katie Barker.
It would appear that the industry is not in the rudest of health given that both excise duty and anti-alcohol health campaigns are on the rise. With supermarkets cutting prices, margins are squeezed while 2,365 pubs closed in 2009 – some 52 a week – according to the British Beer and Pub Association.
Alcohol sales in the UK were up just 2% in 2008/9 compared with 2007/8, according to data from HM Revenues & Customs published in March 2010, which does not distinguish between on and off trade sales.
So how have these three businesses managed to succeed in such a climate? According to the judges, what sets these companies aside it an entrepreneurial spark, an innovative culture and the trust and financing to invest in ideas.
A study released in April 2010 by independent market analysis company Mintel International Group suggests, the online drinks market has doubled in size in the UK over the past five years from £370 million to £745 million. At the forefront of this growth are online wine sales.
Currently under the management of seventh and eight generation founding family members, Berry Bros & Rudd Ltd was one of the winners of the JP Morgan family Business Honours Programme. The company is Britain's oldest wine and spirit merchant, but it was the first wine merchant to launch a website to sell its product range. It has recently expanded its capabilities so it now even has an Iphone application.
The ability of Berry Bros to identify and exploit this area, in what is quite a traditional business, has allowed it to continue to grow throughout the downturn, diversify into new business areas and gain some recognition in the form of the prize.
"If you understand your core business, you can translate that into all sorts of different fields," says seventh-generation chairman Simon Berry. "Innovation comes from an intrinsic knowledge of the market, the customers and the brand, coupled with the fresh ideas of the next generation."
The family recently took another bold step when it sold one of its oldest brands, Cutty Sark whiskey, because it did not fit into the wider business model. "Not many businesses would do that," says Kate Murphy, head of family business at JP Morgan. "Once they realised it was the right thing to sell the brand, they didn't let sentimentality or family legacy stand in the way. That is what sets them apart."
For Shepherd Neame Ltd, the fifth-generation brewer and winner of the Coutts Prize for Family Business, continuing to invest in improving the company, despite the evident difficulties in the industry, was key to the company's strategy during the challenging economic environment.
Crucially, the company did not invest across the board, but chose to focus on the growth areas of food and accommodation. It applied a similar strategy when buying new pubs; instead of buying many of those available, it picked up some good deals and invested in upgrading its existing premises in order to ensure they were better places to visit than their competitors.
The family also saw this as a time to be proactive. It invested heavily in streamlining its IT systems and business processes in order to become more efficient and cost-effective. The strategy has served Shepherd Neame well as it has managed to increase its market share and grow its turnover in the last 12 months.
For Fullers, Smith and Turner PLC, a traditional brewer that was another winner of the JP Morgan family Business Honours Programme, finding a niche in the overcrowded beer market was vital to its success. "We always try and find niches in all of the markets we enter. Our hotel rooms are all boutique so we are not trying to compete with large chains. I think you always need to do something different," explains fourth-generation chairman Michael Turner.
According to a report released in May 2010 from Mintel, the ale market overall is in decline with on-trade sales falling by 23% between 2005-2008. However, there are growth areas to be found, such as organic and chilled cask brands, in both of which Fullers is a market leader.
"Fullers is the only surviving family brewers in London and that speaks volumes," says Murphy. "Why did they make it? The perfect mix of family values and great innovation," she says.
This holy grail, which is evident in the most successful family businesses, was present in all the businesses honoured last week and has enabled them to flourish in an otherwise struggling industry.
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